TIDMREC
RNS Number : 1880T
Record PLC
23 November 2021
RECORD plc
23 November 2021
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2021
Profit growth and diversification of products and revenues
supports interim dividend increase
Record plc ("Record" or "the Company"), the specialist currency
and derivatives manager, today announces its unaudited results for
the six months ended 30 September 2021 ("H1-22").
Financial headlines:
-- Revenue growth of 38% to GBP16.3m (H1-21: GBP11.8m)
-- Interim dividend increased by 56% to 1.80 pence per share (H1-21: 1.15 pence per share)
-- Growth in AUME [1] of 5% in USD terms to $84.1bn (31 March
2021: $80.1bn) and 7% in GBP terms to GBP62.4bn (31 March 2021:
GBP58.1bn)
-- Client numbers remained at 89 (31 March 2021: 89)
-- Management fee growth of 44% to GBP16.1m (H1-21: GBP11.2m)
-- Increased operating margin of 32% (H1-21: 22%)
-- Profit before tax doubled to GBP5.2m (H1-21: GBP2.6m)
-- Basic EPS of 2.08 pence (H1-21: 1.10 pence)
-- Strong financial position with shareholders' equity of GBP25.2m (H1-21: GBP25.7m)
Key developments:
-- New product launch of Record EM Sustainable Finance Fund in
June with USD 750 million AUME at launch in collaboration with UBS
Global Wealth Management provides first milestone in developing ESG
and sustainable investment capabilities
-- Further diversification into higher revenue and more scalable
products increases operating margin
-- Anticipated launch of Municipal Loan Fund before the end of this financial year
-- Reduced concentration on lower-margin Passive Hedging product
-- Focus on modernisation of business continues with investment
in technology to enhance business processes and to develop our
product/service offering
Commenting on the results, Leslie Hill, Chief Executive Officer
of Record plc, said:
"Since I assumed the role of CEO last year, our business has
encountered the significant challenge of implementing a change in
strategic direction during the unprecedented conditions of a global
pandemic. Over the last 18 months, our business has faced this
challenge head on and we have now started to see the tangible
benefits in the form of a more diversified business aligned with
stronger financial performance.
"The benefits of our change in approach to partnering with other
third-party specialists can be seen across all areas of our
business. In this respect we've taken our first steps into the
rapidly growing area of sustainable finance with the successful
launch of Record's EM Sustainable Finance fund alongside UBS Global
Wealth Management, whilst expanding our knowledge and expertise in
financial instruments outside of pure currency. We are also seeing
the benefits in the form of enhanced efficiencies and scalability
from the adoption and integration of new technology.
"Work continues on the modernisation of our business and in the
development of new products, and we anticipate the launch of a
Municipal Loan fund focused on the German institutional market
before the end of the financial year, which we hope will provide
opportunities for further growth in Europe.
"Such transformational change is never easy. However, we have an
excellent team and strong relationships both with clients and our
partners, which I believe will continue to deliver growth and
achieve our goal of building a more modern, profitable and
diversified business."
Analyst presentation
There will be a presentation for analysts at 10.00am on Tuesday
23 November 2021 held via a Zoom call. Please contact the team at
Buchanan via record@buchanan.uk.com for further details. A copy of
the presentation will be made available on the Group's website at
www.recordcm.com.
For further information, please contact:
Record plc +44 (0) 1753 852222
Neil Record - Chairman
Leslie Hill - Chief Executive
Officer
Steve Cullen - Chief
Financial Officer
Buchanan +44 (0) 20 7466 5000
Giles Stewart
Victoria Hayns
Henry Wilson
George Beale
About us
Our purpose: to deliver innovative, thought leading and
practical solutions to the needs of currency market users and
investors, while maintaining independence and integrity.
We are an independent, specialist currency and derivatives
manager with over 38 years of experience which has allowed us to
develop a deep and fundamental understanding of the risk and reward
opportunities within those markets. Record plc has a premium
listing on the Main Market of the London Stock Exchange.
Chief Executive Officer's statement
We continue with our inexorable move to a more technologically
agile and diversified business. We are expanding our offering to
clients and yet remaining a go-to provider for currency and
derivative products and solutions. We will always have currency as
our core competence, in all its forms, but as you will see reading
below we are branching out, as promised. This is a critical part of
our future success.
Progress against strategy
Our EM Sustainable Finance Fund, launched with our client UBS in
June of this year, continues to develop its Frontier Currency and
Sustainable Bond portfolios and interest in the area is growing.
Our total current Frontier and EM currency portfolio stands at $3.3
billion and we are starting to engage with other clients who need
help with innovative solutions in this area, in the realms of both
debt and currency.
Our European business, particularly in Germany, continues to
grow and our first material German Dynamic Hedging mandate started
this summer. We set up our German subsidiary, Record Asset
Management GmbH with offices in Frankfurt, in the final calendar
quarter of 2020 and applied for a BaFin licence earlier this year.
Our Head of Sales Dr Jan Witte is spearheading these efforts,
supported by a growing European team based out of Zurich, Amsterdam
and Frankfurt.
Most promisingly, we anticipate launching a Luxembourg--based
Municipal Loan Fund with Universal--Investment as Fund Manager by
the end of the financial year; this fund will combine European
Municipal Loans managed by our Fixed Income and Derivatives teams
with European trade receivables provided by our collaboration
partners Siegfried and VTeam. This new development will expand our
range of products and further increase the scalability and
diversification of our revenue sources.
Modernisation
This work continues at a strong but measured pace, with
initiatives to build a robust and secure data storage warehouse and
enhanced FX execution capabilities engaging our growing in--house
team and working in conjunction with subject matter experts. This
is all part of bringing the latest technology and design approaches
into the heart of our business, definitely a journey not a
"destination" but one that I am confident will continue to yield
new revenue sources through new offerings, as well as cost savings
by continuing to deliver efficiencies. The house is not finished
and we are working away covered in dust with all the windows open,
but we have a good architect and a great building team whom we try
and give all the TLC they need to make the place a home that all
our clients, old and new, want to visit, and never leave.
Succession
We have made some new appointments and promotions in the last
year, and plan to give more opportunity to our young talent. The
addition of our London office will help to continue to attract and
retain talent, while retaining some of our most experienced
directors as consultants during the transition to ensure stability
and resilience. This is one of the best parts of my job, getting
the right people in the right jobs and then supporting and
mentoring them, although to be fair they teach me just as much.
We also continue to award equity options through our JSOP and
share option schemes and these are proving popular with staff. In
our recent appointments, Matt Hotson and Krystyna Nowak, we have
two new Non-executive Directors who are bringing a very interesting
strategic dynamic to the Board, and this will be very helpful to me
going forward.
Financial results and dividends
The benefits of our change in strategy are now starting to be
reflected in our financial performance. Our push for
diversification into higher-margin and more scalable products and
revenue streams has increased revenue by 38% and almost doubled our
pre-tax profits, with our operating profit margin increasing to 32%
from 22% versus the same period last year. Further financial
information can be found in the Financial review.
Notwithstanding the challenges arising from both covid-19 and
our change in strategy over the last 18 months, neither our capital
management policy nor our dividend policy has changed. The Board
continues to remain confident in the ability of the business to
deliver on its planned strategy and to achieve further growth, and
has decided to pay an increased interim dividend of 1.80 pence per
share (HY21: 1.15p) on 30 December 2021 to shareholders on the
register at 3 December 2021.
Outlook
I am very aware of the need for revitalisation, evolution and
change while we keep what is so good about us; our special
expertise, our integrity and our experienced staff. The marriage of
old and new is a delicate and subtle art but one that, as we get it
right, and I believe we are, will yield exciting growth and
development avenues for us in the future. We are very much at the
start of what we can accomplish.
Leslie Hill
Chief Executive Officer
22 November 2021
Interim management review
Market review
The six months to 30 September 2021 were characterised by a more
auspicious covid-19 outlook as efforts to keep economies open were
generally more successful than the six months prior. The period
began on less positive footing as the highly transmissible Delta
variant became widespread, however high inoculation rates combined
with management strategies - rather than "covid-zero" policies -
generally saw economic activity and mobility continue to recover
and global transmission rates moderated towards the end of the
period.
In spite of the progress made towards exiting the pandemic,
global economic reflation slowed in pace on account of both the
winding down of government support measures and supply chain
issues. Investor attention instead turned towards the prospect of a
more protracted period of elevated inflation rates. Reopening
demand was unmatched by supply across a range of production factors
including labour, energy commodities and finished goods due to
supply chain disruptions. These factors combined to create a
"perfect storm" of commodity price increases, with energy prices
rising significantly through the period, and in particular natural
gas more than doubled in price.
Central banks had the challenge of calibrating policy in
response to the uncertain outlook. Initially thought to be
"transitory" in nature, sticky inflation rates and rising commodity
prices began to drive market-based measures of short--term
inflation expectations higher. The Federal Reserve ("Fed")
carefully communicated policy intentions over the period,
indicating with increasing confidence that tapering of asset
purchases would be appropriate towards the end of the year. The Fed
remained reluctant to raise rates this year, with the Fed dot-plot
suggesting 2022 was more appropriate. At the same time, EM central
banks - especially those of commodity exporters - began decisive
rate hiking cycles to arrest inflation pressures.
Global risk sentiment was broadly supported up to September,
likely helped along by still exceptionally easy financial
conditions. Market appetite shrank towards the end of the period
over concerns around China's Evergrande's solvency, the European
energy crisis, and fears over the US debt ceiling. Furthermore, a
series of Chinese regulatory crackdowns pressured equity markets.
Currency moves during the period were driven by the interplay of
shifts in risk sentiment, relative covid-19 outlooks, inflation
surprises, and the perceived reaction function of central banks.
The US dollar declined during the first two months of the period
before appreciating in the remaining months and ended the period
around 1% up on a trade-weighted basis.
Operating review
As the impact of the pandemic on our business now starts to
recede, during the last six months we have begun to see the signs
of growth and renewed interest from clients in innovation,
especially in the area of sustainable investment. We are working
closely in collaboration with our preferred partners to develop
innovative solutions, whilst continuing to invest in our people and
infrastructure, more information for which is given below.
Our clients
Record's strong institutional client base responded robustly to
the pandemic, maintaining their strategic hedging programmes in
almost all cases. As lockdowns have lifted in most jurisdictions,
the business of investing has returned to normal with appetite
amongst clients to pick up new projects previously put to one side
during the height of the pandemic. Two key themes continue to
dominate investors' focus: adding yield and increasing
sustainability. Record's efforts have therefore been focused on
helping our clients achieve these goals in a number of ways. One
highlight of the half year was the launch of the Record EM
Sustainable Finance Fund. This fund not only solves a number of
challenges for our leading global wealth manager partner, including
the ability to offer innovation in sustainable investments via
exposure to EM local currencies, but has received widespread
interest both from existing and new clients.
Other asset managers are also feeling the return of allocators
to the market and we are seeing redoubled interest from alternative
managers in bespoke hedging solutions as clients search globally
for yield, as well as alternative investments in sustainable
finance. Finally, we are seeing the appetite for yield in a number
of bespoke projects which combine Record's expertise with that of
best--in--class third parties in order to help our clients maximise
their returns in the challenging investment environment. As always,
the strength of our relationships and the trust our clients place
in us is at the heart of all that we do from cutting edge
innovation to efficient and reliable implementation.
Our people
Having successfully navigated through the most critical stages
of the pandemic, we have proved that it's possible to have
employees working remotely without any diminution in client service
levels, security or productivity. Consequently, and looking ahead
to the future, we are now able to offer a much broader degree of
flexibility to employees with respect to where and how they work.
Not only does this enhance the work-life balance of our employees
and hence their general wellbeing and mental health, it is another
"tool in the box" for attracting and retaining our talented
employees. Notwithstanding the above, the importance of continuing
to provide high-quality office space to reinforce the benefits of
collaborative working, training and social interaction is not
underestimated. In this respect, we recently opened a new office in
London and plan to downsize our Windsor headquarters upon cessation
of the lease in September 2022, which gives further choice to our
employees as to how best utilise their time working, for example
with clients, working alone or working in collaboration with each
other. We believe that offering such a balance and choice both in
work patterns and location will serve to increase overall
productivity and employee retention, in addition to helping to
attract new talent to the business.
Our technology and operations
As the UK government's lockdown measures have eased, Record has
successfully continued working from home, with business continuity
fully maintained throughout the period. We are now supporting
flexible working across the business, including remote working,
office-based, or hybrid working patterns enabled for all staff.
Remote access systems and security controls have continued to be
enhanced in line with this, as well as further investment in IT
hardware as required. This new normal has therefore become the
foundation for us from which to further automate existing manual
tasks, explore new technologies and processes, and invest in modern
software development projects.
Our governance and oversight
A comprehensive review of our governance structure is currently
underway. This will ensure that we have the most appropriate
structure to support the strategy, and to continue to provide the
relevant level of control and oversight across all of the Group
companies aligned with the expected future growth of the Group. In
the meantime, our governance, risk and management reporting
framework continues to function as expected. Meetings on the whole
take place in the office, with some hybrid meetings allowing
participants to dial in remotely.
Our business model and profitability
Our existing hedging products and client base continue to
provide a robust core of revenue upon which to build, and we
continue to work hard in maintaining our strong relationships and
the highest levels of client service in this regard. However, in
order to deliver the growth and longevity demanded by our change in
strategy, it is also necessary to provide innovative and scalable
products, using technology to ensure efficiency of delivery, to
increase margins and to maximise profitability.
Following our transitional year in FY--21, as expected we are
now starting to see the financial impact from our focus on product
diversification into innovative and higher-margin products flow
through to our revenue and ultimate profitability. In comparison to
the same period last year (six months ended 30 September 2020:
H1-21), our revenue has increased by 38% and we've doubled our
operating profit, whilst our operating margin has increased from
22% to 32% over the same period. Further financial information is
given in the Financial review section.
Brexit
As part of our Brexit strategy, the Group has already
established a German subsidiary and its application to BaFin for
regulatory approval is on track. Whilst Brexit has not impacted our
ability to service our existing EU27 client base, it has somewhat
constrained our ability to market a small number of our products to
potential EU27 clients, which we anticipate being fully mitigated
once formal authorisation from BaFin is confirmed.
Product investment performance
Hedging
Our hedging products are predominantly systematic in nature. The
effectiveness of each client mandate is assessed regularly and
adjustments are made when necessary in order to respond to changing
market conditions or to bring the risk profile of the hedging
mandate in line with the client's risk tolerance.
Passive Hedging
Record has developed and runs an enhanced Passive Hedging
service, which aims to reduce the cost of hedging by introducing
additional flexibility into the implementation of currency hedges
without changing the hedge ratio. While the investment process is
partly systematic, the episodic nature of many opportunities
exploited by the strategy means it requires a higher level of
discretionary oversight than has historically been associated with
Passive Hedging.
Since the aggressive central bank interventions seen in 2020 in
response to the covid-19 pandemic, we have continued to observe
large and consistent levels of government stimulus into global
markets. This has introduced large amounts of cash liquidity into
markets, and has caused FX forward pricing to remain very stable.
In light of this lack of volatility, discretionary decisions have
favoured running programmes closer to their benchmarks for extended
periods during the year, as the opportunities to add value have
been limited. FX transaction costs have been at historically low
levels, with bank dealers preferring to compete for market share
through competitive pricing.
Half --year Return since
return inception
------------------------------------------------------------------------------------- ----------- ------------
Value added by enhanced Passive Hedging programme relative to a fixed-tenor benchmark (0.01%) 0.08% p.a.
------------------------------------------------------------------------------------- ----------- ------------
Dynamic Hedging
During the period, US-based Dynamic Hedging clients experienced
a strengthening of the US dollar against developed market
currencies. The Dynamic Hedging programmes responded as expected
and hedge ratios were adjusted systematically in response to
currency movements; however, hedging returns in the programmes were
marginally negative, due to elevated costs associated with varying
hedge ratios.
Half --year Return since
return inception
---------------------------------------- ----------- ------------
Value added by Dynamic Hedging programme (0.08%) 0.43% p.a.
---------------------------------------- ----------- ------------
Currency for Return
Record's Currency for Return suite of products includes both
discretionary and systematic investment styles. The Record EM
Sustainable Finance Fund uses a more discretionary approach, whilst
the Currency Multi-Strategy product is a more systematic offering
combining five individual strategies.
Record EM Sustainable Finance Fund
The new Record EM Sustainable Finance Fund, launched on 28 June
2021, is a result of the strategic partnership between Record and
UBS Wealth Management. The Fund aims to stabilise currencies in
developing economies, improve the flow of development finance and
enhance financing projects in illiquid markets. The strategy
targets positive sustainability outcomes across a multidimensional
investment process, whereby it trades liquid and illiquid EM
currencies designed to help stabilise exchange rates and to absorb
currency risk, and invests in an underlay of sustainable
development bonds issued by multilateral development banks with
strong development operations in emerging economies. Furthermore,
an active engagement strategy with counterparty banks encourages
improvements in areas of ESG.
Although returning -0.32% for the half year to 30 September
2021, the Record EM Sustainable Finance Fund performed well when
compared to major market EM sovereign bond indices. The overweight
exposures in the currencies of some economies in Eastern Europe,
and Central and Eastern Asia, contributed positively to the
outperformance in the period. Exposure to currencies in Latin
America performed poorly in the period following growing local
political and fiscal uncertainties, inflationary pressures,
concerns over a slowdown in global growth, in particular in China,
and volatile commodity prices. The return of shorting a diversified
basket of developed market currencies to fund the long exposures in
emerging market currencies also added positively to the
outperformance.
The USD-denominated bonds in the portfolio closed slightly
weaker on the back of increasing yields in the US market as the Fed
indicated that tapering could start as early as November 2021 amid
rising price pressures and strong growth momentum.
Half --year Return since
return inception
--------------------------------- ----------- ------------
Record EMSF Fund USD Share Class (0.32%) (0.32%)
GBI EM Global Diversified(1) (3.56%) (3.56%)
--------------------------------- ----------- ------------
1. Source: J.P. Morgan.
Multi-Strategy
Record's Currency Multi-Strategy product combines a number of
diversified return streams, which include:
-- Forward Rate Bias ("FRB", also known as Carry) and Emerging
Market ("EM") strategies which are founded on market risk premia
and as such perform more strongly in "risk on" environments;
and
-- Momentum, Value and Range--Trading strategies which are more
behavioural in nature, and as a result are less risk sensitive.
Currency Multi-Strategy returned positively during the period
which was largely driven by outperformance in the EM and Value
modules. Widening EM-DM rate differentials and a supportive
cyclical backdrop created tailwinds for EM currencies in the
period. Value returned positively on the back of short exposures in
Australia where lagging vaccination efforts weighed on economic
activity and the rate outlook. The Momentum strand detracted from
returns due to reversal of multi-month trends in the period.
Volatility
Half --year Return since since
return inception inception
Index/composite returns % % p.a. % p.a.
----------------------------------- ----------- ------------ ----------
Record Multi-Strategy Composite(2) 1.69% 1.00% 3.13%
----------------------------------- ----------- ------------ ----------
2. Record Multi-Strategy Composite return data is since
inception in July 2012, showing excess returns data gross of fees
in USD base and scaled to a 4% target volatility.
Scaling
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes. The
segregated mandates allow clients to select the level of scaling
and/or the volatility target. The pooled funds have historically
offered clients a range of scaling and target volatility
levels.
It should be emphasised that in this case "scaling" refers to
the multiple of the aggregate notional value of forward contracts
in the currency programme, to the segregated mandate size or the
pooled fund's net assets. This is limited by the willingness of
counterparty banks to take exposure to the segregated client or
pooled fund. The AUME of those mandates where scaling or a
volatility target is selected is represented in Record's AUME at
the scaled value of the mandate, as opposed to the segregated
mandate size or the pooled fund's net assets.
AUME development
AUME increased over the period by 5% to $84.1 billion in US
dollar terms, and increased in sterling terms by 7% to GBP62.4
billion. Total net inflows for the period were $1.9 billion, of
which $1.6 billion arose from new client mandates.
The AUME movement over the six-month period is analysed as
follows:
AUME movement analysis in the six months to 30 September
2021
$bn
------------------------------------------------------- ----
AUME at 1 April 2021 80.1
Net client flows 1.9
Equity and other market impact 1.8
Foreign exchange impact and mandate volatility scaling 0.3
------------------------------------------------------- ----
AUME at 30 September 2021 84.1
------------------------------------------------------- ----
Product mix
The product mix has remained broadly constant when compared to
the year end. However, the change in mix across the hedging
products means the higher-margin Dynamic Hedging AUME now accounts
for 12% of total AUME versus only 5% when compared to the same
period last year, as shown in the table below.
AUME composition by product
30 Sep 21 30 Sep 20 31 Mar 21
----------- ----------- -----------
$bn % $bn % $bn %
-------------------- ------ --- ------ --- ------ ---
Passive Hedging 63.0 76 55.6 85 61.5 77
Dynamic Hedging 10.3 12 3.2 5 9.3 12
Currency for Return 5.4 6 3.4 5 3.9 5
Multi-product 5.2 6 3.5 5 5.2 6
Cash and other 0.2 - 0.2 - 0.2 0
-------------------- ------ --- ------ --- ------ ---
Total 84.1 100 65.9 100 80.1 100
-------------------- ------ --- ------ --- ------ ---
Equity and other market performance
Record's AUME is affected by movements in equity and other
markets because Passive and Dynamic Hedging mandates, and some of
the Multi-product mandates, are linked to equity holdings or other
asset types such as bonds or real estate.
Additional details on the composition of assets underlying the
Hedging and Multi-product mandates are provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
Class of assets underlying mandates by product as at 30
September 2021
Fixed
Equity income Other
% % %
---------------- ------ ------ -----
Passive Hedging 30 34 36
Dynamic Hedging 91 - 9
Multi-product - - 100
---------------- ------ ------ -----
Forex
Approximately 79% of the Group's AUME is non--US dollar
denominated. Therefore, foreign exchange movements may have an
impact on AUME when expressing non--US dollar AUME in US dollars,
although this movement does not have an equivalent impact on the
sterling value of fee income. Exchange rate movements decreased
AUME by $0.2 billion in the period and changes to mandate
volatility targeting increased AUME by $0.5 billion.
Client numbers
Client numbers remained at 89 the same as the financial year end
2021, and have increased by +15 when compared to the same period
last year (H1-21: 74).
Financial review
As expected, the benefits from the implementation of the new
strategy in FY-21 are now being seen more fully in financial terms
with increases in revenue, profits, operating margin and earnings.
The Group continues to work on developing new and innovative
investment products with its chosen partners, whilst maintaining
its focus on the modernisation of systems and processes.
Overview
Operating profit for the period of GBP5.2 million was GBP2.6
million higher than the equivalent period last year and GBP1.6
million higher than H2-21. Total revenue increased by 38% to
GBP16.3 million (H1--21: GBP11.8 million) and by 20% versus H2-21
(GBP13.6 million).
Operating expenses, excluding variable remuneration, increased
by 3% to GBP7.9 million. Variable remuneration increased to GBP2.8
million (H1--21: GBP1.3 million), with the operating profit margin
increasing to 32% (H1--21: 22%) and profit before tax doubling to
GBP5.2 million (H1--21: GBP2.6 million).
Revenue
Total revenue increased by 38% to GBP16.3 million over the
equivalent period last year (H1-21: GBP11.8 million) and by 20%
compared to the second half of last year (H2--21: GBP13.6 million)
reflecting the full impact of the higher AUME at the start of the
period plus net inflows of $1.9 billion over the six months.
No performance fees were earned in the period (H1--21: GBPnil
and H2--21: GBP0.1 million). Passive Hedging management fees of
GBP5.8 million were GBP0.2 million lower than the equivalent period
last year (H1--21: GBP6.0 million) and GBP0.4 million higher
compared to the second half of last year (H2-21: GBP5.4
million).
Dynamic Hedging management fees of GBP4.8 million were GBP2.9
million higher than H1-21 and GBP1.0 million higher than H2--21
predominantly due to the new material mandate win announced in
September 2020.
Currency for Return management fees of GBP2.1 million are GBP1.2
million higher than the same period last year (H1-21: GBP0.9
million) and GBP1.0 million higher than the second half of last
year predominantly due to inflows of $1.0 billion over the period
mainly arising from the launch of the EM Sustainable Finance Fund
in the period.
Management fees of GBP3.4 million from the Multi-product
category are GBP1.0 million higher than the same period last year
(H1-21: GBP2.4 million) and in line with the second half of last
year (H2-21: GBP3.5 million).
The GBP0.4 million decrease in other currency services income to
GBP0.2 million (H1-21: GBP0.6 million) reflects a reclassification
of income to Multi--product in H2-21 last year.
Revenue analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
--------------------------------- ---------- ---------- ---------
Management fees
Passive Hedging 5.8 6.0 11.4
Dynamic Hedging 4.8 1.9 5.6
Currency for Return 2.1 0.9 2.0
Multi-product 3.4 2.4 5.9
--------------------------------- ---------- ---------- ---------
Total management fees 16.1 11.2 24.9
--------------------------------- ---------- ---------- ---------
Performance fees - - 0.1
Other investment services income 0.2 0.6 0.4
--------------------------------- ---------- ---------- ---------
Total revenue 16.3 11.8 25.4
--------------------------------- ---------- ---------- ---------
Other investment services income consists of fees from ancillary
investment management services.
Average management fee rates by product (bps p.a.)
The average management fee rates have remained broadly constant
over the six months ended 30 September 2021 with the exception of
an increase in the Currency for Return average management fee rate
for the period as a result of the inclusion of the higher-margin EM
Sustainable Finance Fund from launch in June 2021.
Expenditure
Expenditure analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
-------------------------------------------------------- ---------- ---------- ---------
Personnel costs 5.0 5.0 10.3
Non-personnel costs 2.9 2.7 5.4
-------------------------------------------------------- ---------- ---------- ---------
Administrative expenditure excluding Group Profit Share 7.9 7.7 15.7
Group Profit Share 2.8 1.3 3.2
-------------------------------------------------------- ---------- ---------- ---------
Total administrative expenditure 10.7 9.0 18.9
-------------------------------------------------------- ---------- ---------- ---------
Other income and expenditure 0.3 - -
-------------------------------------------------------- ---------- ---------- ---------
Total expenditure 11.0 9.0 18.9
-------------------------------------------------------- ---------- ---------- ---------
In line with our strategy to modernise the business, we continue
to invest in new technology and systems, and to plan for
succession. Total administrative expenditure for the period of
GBP10.7 million increased by GBP1.7 million compared with the
equivalent prior year period (H1-21: GBP9.0 million) and increased
by GBP0.8 million versus the second half of last year (H2-21:
GBP9.9 million).
Personnel costs of GBP5.0 million excluding Group Profit Share
("GPS") were in line with the first half of last year, and fell by
GBP0.3 million compared to the second half, reflecting the decrease
in some one-off restructuring payments made before the year
end.
As expected, non-personnel costs for the period of GBP2.9
million were GBP0.2 million higher than the equivalent period last
year. This reflects the increased investment by the business in the
provision of external technical expertise and consultancy linked to
the modernisation of our systems and technology.
Group Profit Share ("GPS") Scheme
The cost of the GPS Scheme is GBP2.8 million for the period,
increasing in line with operating profit. The GPS cost is
calculated as 35% of operating profits, which is within the
previously established range of 25% to 35% of pre-GPS operating
profit. For the equivalent period last year, the GPS equated to 33%
and was 34% for the full year.
Cash flow
The Group generated GBP6.0 million of cash from operating
activities after tax during the period (H1-21: GBP2.6 million).
Taxation paid during the period fell to GBP0.3 million compared to
GBP0.8 million for the same period last year.
During the period an investment of GBP0.7 million in impact
bonds matured and was reinvested before period end.
During the period the company purchased 4 million of its own
shares for GBP3.4 million to be held by the Employee Benefit Trust
to cover future obligations relating to the Record share
schemes.
The Group paid dividends totalling GBP3.1 million in the period
(H1-21: GBP3.1 million), more information for which is given in
note 5 to the financial statements.
Dividends and capital
In line with the Board's capital and dividend policy, the Group
will pay an interim dividend of 1.80 pence per share in respect of
the six-month period, equating to a distribution of GBP3.4 million,
following which the business will retain cash and money market
instruments on the balance sheet which are significantly in excess
of financial resource requirements required for regulatory
purposes.
The Group has no debt and its capital and dividend policy aims
to ensure continued balance sheet strength for the Group.
Shareholders' funds were GBP25.2 million at 30 September 2021
(H1--21: GBP25.7 million).
Principal risks and uncertainties
The principal risks currently facing the Group and those that we
anticipate the Group will be exposed to in the short term remain
the same as those outlined in the Annual Report 2021.
These risks are:
-- strategic risk - the risk of failure to deliver strategy;
-- business risk - including concentration risk, margin
compression risk, people and employment risk and the risk of
regulatory change;
-- operational risk - including technology and information
security risk and the risk associated with the operational control
environment; and
-- investment risk - including the risk of product underperformance and market liquidity risk.
Cautionary statement
This Interim Report contains certain forward-looking statements
with respect to the financial condition, results, operations and
business of Record. These statements involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied in this Interim Report. Nothing in this
Interim Report should be construed as a profit forecast.
Statement of Directors' responsibilities
The interim financial report is the responsibility of the
Directors, who confirm that to the best of their knowledge:
-- the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 - "Interim Financial
Reporting"; and
-- the Interim management review includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of consolidated financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the Annual Report 2021 that could do so. Related party
transactions are disclosed in note 10.
The Directors of Record plc are listed on the Record plc website
at www.recordcm.com/en/about-us/our-people/board-of-directors/
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
22 November 2021
Independent review report to Record plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2021 which comprises the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in
equity, the consolidated statement of cash flows and the notes to
the financial statements, including a summary of significant
accounting policies.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
22 November 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
Six months ended 30 September 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Revenue 3 16,333 11,838 25,412
Cost of sales (206) (213) (399)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Gross profit 16,127 11,625 25,013
Administrative expenses (10,713) (9,016) (18,934)
Other income or expense (264) (36) 41
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Operating profit 5,150 2,573 6,120
Finance income 21 42 71
Finance expense (17) (22) (38)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Profit before tax 5,154 2,593 6,153
Taxation (1,156) (449) (802)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Profit after tax 3,998 2,144 5,351
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Total comprehensive income for the period 3,998 2,144 5,351
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Profit and total comprehensive income for the period attributable to
Owners of the parent 3,998 2,151 5,351
Non-controlling interests 11 - (7) -
--------------------------------------------------------------------- ---- ---------- ---------- ---------
3,998 2,144 5,351
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Earnings per share for the period (expressed in pence per share)
Basic earnings per share 4 2.08p 1.10p 2.75p
Diluted earnings per share 4 2.01p 1.10p 2.73p
--------------------------------------------------------------------- ---- ---------- ---------- ---------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of financial position
As at 30 September 2021
Unaudited Unaudited Audited
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
Note GBP'000 GBP'000 GBP'000
---------------------------------------------------- ---- --------- --------- ---------
Non-current assets
Intangible assets 318 449 420
Right--of--use assets 440 931 684
Property, plant and equipment 510 686 683
Investments 6 3,178 2,759 3,046
Deferred tax assets 508 - 320
---------------------------------------------------- ---- --------- --------- ---------
Total non-current assets 4,954 4,825 5,153
---------------------------------------------------- ---- --------- --------- ---------
Current assets
Trade and other receivables 8,794 7,276 8,006
Derivative financial assets 8 - 158 260
Money market instruments with maturities > 3 months 7 5,875 12,491 12,932
Cash and cash equivalents 7 11,408 6,848 6,847
---------------------------------------------------- ---- --------- --------- ---------
Total current assets 26,077 26,773 28,045
---------------------------------------------------- ---- --------- --------- ---------
Total assets 31,031 31,598 33,198
---------------------------------------------------- ---- --------- --------- ---------
Current liabilities
Trade and other payables (3,919) (2,422) (3,426)
Corporation tax liabilities (959) (349) (315)
Provisions (200) - -
Lease liabilities (372) (526) (539)
Financial liabilities 6 - (1,800) (1,696)
Derivative financial liabilities 8 (270) (35) (16)
---------------------------------------------------- ---- --------- --------- ---------
Total current liabilities (5,720) (5,132) (5,992)
---------------------------------------------------- ---- --------- --------- ---------
Non-current liabilities
Deferred tax liabilities (77) (30) (108)
Provisions - (200) (200)
Lease liabilities - (377) (99)
---------------------------------------------------- ---- --------- --------- ---------
Total non-current liabilities (77) (607) (407)
---------------------------------------------------- ---- --------- --------- ---------
Total net assets 25,234 25,859 26,799
---------------------------------------------------- ---- --------- --------- ---------
Equity
Issued share capital 9 50 50 50
Share premium account 3,008 2,289 2,418
Capital redemption reserve 26 26 26
Retained earnings 22,150 23,369 24,305
---------------------------------------------------- ---- --------- --------- ---------
Equity attributable to owners of the parent 25,234 25,734 26,799
---------------------------------------------------- ---- --------- --------- ---------
Non-controlling interests 11 - 125 -
---------------------------------------------------- ---- --------- --------- ---------
Total equity 25,234 25,859 26,799
---------------------------------------------------- ---- --------- --------- ---------
Approved by the Board on 22 November 2021 and signed on its
behalf by:
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity
Six months ended 30 September 2021
Equity
attributable
Called--up Capital to owners
share Share premium redemption Retained of the Non-controlling Total
capital account reserve earnings parent interests equity
Unaudited Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
As at 1
April 2020 50 2,259 26 25,694 28,029 132 28,161
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Profit and
total comprehensive
income for
the period - - - 2,151 2,151 (7) 2,144
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Dividends
paid 5 - - - (3,068) (3,068) - (3,068)
Own shares
acquired
by EBT - - - (1,589) (1,589) - (1,589)
Release
of shares
held by
EBT - 30 - 419 449 - 449
Share-based
payment
reserve
movement - - - (238) (238) - (238)
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Transactions
with shareholders - 30 - (4,476) (4,446) - (4,446)
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
As at 30
September
2020 50 2,289 26 23,369 25,734 125 25,859
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Profit and
total comprehensive
income for
the period - - - 3,200 3,200 (125) 3,075
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Dividends
paid 5 - - - (2,222) (2,222) - (2,222)
Trade Record
sale - - - 32 32 - 32
Own shares
acquired
by EBT - - - (749) (749) - (749)
Release
of shares
held by
EBT - 129 - 574 703 - 703
Share-based
payment
reserve
movement - - - 101 101 - 101
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Transactions
with shareholders - 129 - (2,296) (2,167) - (2,167)
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
As at 31
March 2021 50 2,418 26 24,305 26,799 - 26,799
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Profit and
total comprehensive
income for
the period - - - 3,998 3,998 - 3,998
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Dividends
paid 5 - - - (3,089) (3,089) - (3,089)
Own shares
acquired
by EBT - - - (3,828) (3,828) - (3,828)
Release
of shares
held by
EBT - 590 - 661 1,251 - 1,251
Share-based
payment
reserve
movement - - - 103 103 - 103
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
Transactions
with shareholders - 590 - (6,153) (5,563) - (5,563)
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
As at 30
September
2021 50 3,008 26 22,150 25,234 - 25,234
-------------------- ---- ---------- ------------- ----------- --------- ------------- --------------- -------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of cash flows
Six months ended 30 September 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Profit after tax 3,998 2,144 5,351
Adjustments for non-cash movements
Depreciation of right-of-use assets 245 246 490
Depreciation of property, plant and equipment 175 144 298
Amortisation of intangible assets 102 83 168
Share-based payments 155 322 486
Other non-cash movements 806 (804) (492)
Finance income (21) (42) (71)
Finance expense 17 22 38
Tax expense 1,156 449 802
Change in working capital
(Increase)/decrease in receivables (788) 1,421 696
Increase/(decrease) on payables 494 (588) 417
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Net cash inflow from operating activities 6,339 3,397 8,183
Corporation tax paid (303) (756) (1,385)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Net cash inflow from operating activities 6,036 2,641 6,798
Purchase of intangible software - (62) (189)
Purchase of property, plant and equipment (2) (79) (230)
Purchase of investments (782) (411) (881)
Sale/(purchase) of money market instruments with maturity > 3 months 7,056 (4,533) (4,973)
(Redemption) of units in funds (1,808) (354) (335)
Redemption of bonds 724 - -
Investment in subsidiaries - - (23)
Sale of Trade Record shares - - 120
Interest received 21 47 71
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Net cash inflow/(outflow) from investing activities 5,209 (5,392) (6,440)
Cash flow from financing activities
Lease repayments (267) (258) (522)
Lease interest payments (11) (22) (38)
Purchase of own shares (3,355) (1,492) (1,808)
Dividends paid to equity shareholders 5 (3,089) (3,068) (5,290)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Cash outflow from financing activities (6,722) (4,840) (7,658)
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Net increase/(decrease) in cash and cash equivalents in the period 4,523 (7,591) (7,300)
Effect of exchange rate changes 38 145 (147)
Cash and cash equivalents at the beginning of the period 6,847 14,294 14,294
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Cash and cash equivalents at the end of the period 11,408 6,848 6,847
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Closing cash and cash equivalents consists of:
Cash 7 4,576 6,334 2,372
Cash equivalents 7 6,832 514 4,475
--------------------------------------------------------------------- ---- ---------- ---------- ---------
Cash and cash equivalents 7 11,408 6,848 6,847
--------------------------------------------------------------------- ---- ---------- ---------- ---------
The notes are an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements
For the six months ended 30 September 2021
These consolidated financial statements exclude disclosures that
are immaterial and judged to be unnecessary to understand our
results and financial position.
1. Basis of preparation
The condensed set of consolidated financial statements included
in this interim financial report has been prepared in accordance
with International Accounting Standard 34 - "Interim Financial
Reporting". The financial information set out in this Interim
Report does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. The Group's statutory financial
statements for the year ended 31 March 2021 were prepared in
accordance with IFRS and have been delivered to the Registrar of
Companies. The auditor's report on those financial statements was
unqualified and did not contain statements under section 498(2) or
section 498(3) of the Companies Act 2006.
The accounting policies for recognition, measurement,
consolidation and presentation as set out in the Group's Annual
Report for the year ended 31 March 2021 have been applied in the
preparation of the IFRS condensed consolidated half-year financial
information.
Application of new standards
There have been no new or amended standards adopted in the
financial year beginning 1 April 2021 which have a material impact
on the Group or any company within the Group.
Impacts of covid-19 during the period
The Chief Executive Officer's statement and Operating review
sections of this Interim Report provide information as to the
broader effects of covid-19 on the Group's financial results, its
operations and prospects. The Group has given due consideration as
to the impact of uncertainty arising from covid-19 related factors
on the production of the interim financial statements.
Going concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis for the preparation of the
interim financial statements, the Directors have assessed whether
the Group can meet its obligations as they fall due and can
continue to meet its solvency requirements over a period of at
least twelve months from the approval of this report.
The Board has considered financial projections which demonstrate
the ability of the Group to withstand market shocks in a range of
scenarios, including very severe ones.
In assessing the appropriateness of the going concern basis, the
Board considered base case liquidity and solvency projections that
incorporated an estimated view of the potential economic downturn
that is anticipated to be experienced due to the impacts of
covid-19. In addition, a more onerous economic downturn was also
modelled. The projections demonstrated that excess capital would
remain in the Group under both scenarios, supporting cash
generation in the going concern period.
As a result of the above assessment, the Directors do not
currently foresee any material uncertainties relating to events or
conditions that may be relevant to the next 12 months, and are
satisfied that all mandatory outgoings can be met over the going
concern period, and consider it appropriate to adopt the going
concern basis in the preparation of these interim financial
statements.
Consolidation
The accounting policies adopted in these interim financial
statements are identical to those adopted in the Group's most
recent annual financial statements for the year ended 31 March
2021.
The consolidated financial information contained within the
financial statements incorporates financial statements of the Group
and entities controlled by the Group (its subsidiaries) drawn up to
30 September 2021. Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. Where the Company
controls an entity, but does not own all the share capital of that
entity, the interests of the other shareholders are stated within
equity as non-controlling interests or within current liabilities
as financial liabilities depending on the characteristic of the
investment, being the proportionate share of the fair value of
identifiable net assets on date of acquisition plus the share of
changes in equity since the date of consolidation.
An Employee Benefit Trust ("EBT") has been established for the
purposes of satisfying certain share-based awards. The Group has
"de facto" control over this entity. This trust is fully
consolidated within the financial statements (see note 10 for
further details).
During the period, the Group had investments in two funds, which
it was in a position to control. These fund investments are held by
Record plc and represent seed capital investments by the Group. The
funds controlled by the Group have been consolidated on a
line-by-line basis from the time that the Group gained control over
the fund until termination (see Note 6 for further
information).
2. Critical accounting estimates and judgements
The estimates and judgements applied in the interim financial
statements are consistent with those applied in the financial
statements for the year ended 31 March 2021.
3. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the provision of currency management services.
Our revenue typically arises from charging management fees or
performance fees and both are accounted for in accordance with IFRS
15 - "Revenue from Contracts with Customers".
Management fees are recorded on a monthly basis as the
underlying currency management service occurs. There are no other
performance obligations. Management fees are calculated as an
agreed percentage of the Assets Under Management Equivalents
("AUME") denominated in the client's chosen base currency. The
percentage varies depending on the nature of services and the level
of AUME. Management fees are typically invoiced to the customer
quarterly with receivables recognised for unpaid invoices.
The Group is entitled to earn performance fees from some clients
where the performance of the clients' mandates exceeds defined
benchmarks over a set time period, and are recognised when the fee
amount can be estimated reliably and it is highly probable that it
will not be subject to significant reversal.
Performance fee revenues are not considered to be highly
probable until the end of a contractual performance period and
therefore are not recognised until they crystallise, at which time
they are payable by the client and are not subject to any clawback
provisions. There are no other performance obligations or services
provided which suggest these have been earned either before or
after crystallisation date.
a) Revenue from contracts with customers
The following table provides a breakdown of revenue from
contracts with customers, with management fees analysed by product.
Other investment services income includes fees from signal hedging
and fiduciary execution.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
Revenue by product type GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ----------
Management fees
Passive Hedging 5,802 6,027 11,377
Dynamic Hedging 4,783 1,889 5,623
Currency for Return 2,077 937 2,005
Multi-product 3,446 2,379 5,873
--------------------------------- ---------- ---------- ----------
Total management fee income 16,108 11,232 24,878
Performance fee income - - 81
Other investment services income 225 606 453
--------------------------------- ---------- ---------- ----------
Total revenue 16,333 11,838 25,412
--------------------------------- ---------- ---------- ----------
b) Geographical analysis
The geographical analysis of revenue is based on the destination
i.e. the location of the client to whom the services are
provided.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
Revenue by geographical region GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- ----------
UK 1,158 1,151 2,322
Europe (excluding UK and Switzerland) 4,740 1,622 3,223
US 5,437 3,273 8,619
Switzerland 4,401 4,800 9,097
Other 597 992 2,151
-------------------------------------- ---------- ---------- ----------
Total revenue 16,333 11,838 25,412
-------------------------------------- ---------- ---------- ----------
4. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial period by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share is calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial
period used in the basic and diluted earnings per share
calculations.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ----------- ----------- -----------
Weighted average number of shares used in calculation 192,250,212 195,664,074 194,461,787
Effect of potential dilutive ordinary shares - share options 7,075,489 426,382 1,705,089
Weighted average number of shares used in calculation 199,325,701 196,090,456 196,166,876
------------------------------------------------------------- ----------- ----------- -----------
Basic earnings per share 2.08p 1.10p 2.75p
Diluted earnings per share 2.01p 1.10p 2.73p
------------------------------------------------------------- ----------- ----------- -----------
The potential dilutive shares relate to the share options and
Joint Share Ownership Plan ("JSOP") awards granted in respect of
the Group's Share Scheme. At the beginning of the period there were
11,844,421 share options and 2,500,000 JSOP awards outstanding.
During the six--month period 3,747,500 share options and 32,500
JSOP awards were granted. During the period 586,375 share options
were exercised and 593,750 JSOP awards vested. No JSOP awards
lapsed in the period and 34,500 share options lapsed in the
period.
As at 30 September 2021, there were share options in place over
14,971,046 shares and 1,938,750 JSOP awards.
5. Dividends
The dividends paid during the six months ended 30 September 2021
totalled GBP3,089,258 (1.60 pence per share), being a final
ordinary dividend in respect of the year ended 31 March 2021 of
1.15 pence per share and a special dividend of 0.45 pence per
share. An interim dividend of GBP2,222,171 (1.15 pence per share)
was paid in the six months ended 31 March 2021 thus the full
ordinary dividend in respect of the year ended 31 March 2021 was
2.75 pence per share.
The dividends paid during the six months ended 30 September 2020
totalled GBP3,068,153 (1.56 pence per share), being a final
ordinary dividend in respect of the year ended 31 March 2020 of
1.15 pence per share and a special dividend of 0.41 pence per
share. An interim dividend of GBP2,268,389 (1.15 pence per share)
was paid in the six months ended 31 March 2020, thus the full
ordinary dividend in respect of the year ended 31 March 2020 was
2.71 pence per share.
The interim dividend declared in respect of the six months ended
30 September 2021 is 1.80 pence per share.
6. Accounting for investments
Funds have been consolidated on a line-by-line basis where the
Group has determined that a controlling interest exists through an
investment holding in the fund, in accordance with IFRS 10 -
"Consolidated Financial Statements". Otherwise, investments in
funds are measured at fair value through profit or loss.
Record held seed investments in two funds which have been active
during the period until their termination in June 2021. The Group
controlled both the Record Currency - Strategy Development Fund and
the Record - Currency Multi-Strategy Fund throughout this period
and the comparative periods, and both were consolidated in full, on
a line-by-line basis, in the Group's financial statements
throughout these periods up until termination.
Investments
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
GBP'000 GBP'000 GBP'000
-------------------- --------- --------- ---------
Impact bonds 2,234 2,365 2,199
Investment in funds 944 394 847
-------------------- --------- --------- ---------
Investments 3,178 2,759 3,046
-------------------- --------- --------- ---------
Financial liabilities
Record plc has made investments in a number of seed funds where
it is in a position to be able to control those funds by virtue of
the size of its holding. When Record plc is not the only investor
in such funds and the external investment instrument does not meet
the definition of an equity instrument under IAS 32 then the
instrument is classified as a financial liability. Since
unitholders have the right to cancel units at any time in return
for cash, these are considered puttable instruments under IAS 32
and are therefore deemed to represent financial liabilities as
opposed to equity. The financial liabilities are measured at cost
plus movement in value of the third party investment in the
fund.
The Record - Currency Multi-Strategy Fund and the Record
Currency - Strategy Development Fund were considered to be under
control of the Group as the combined holding of Record plc and its
Directors constituted a majority interest in the comparative
periods, and also in this period until termination in June
2021.
The mark-to-market value of units held by investors in these
funds other than Record plc are shown as financial liabilities in
the Group financial statements, in accordance with IFRS.
Mark --to --market value of external holding in seed funds
included in the accounts of the Record Group
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- ---------
Record - Currency Multi-Strategy Fund - 1,800 1,696
Financial liabilities - 1,800 1,696
-------------------------------------- --------- --------- ---------
The financial liabilities relate only to the fair value of the
external investors' holding in the seed funds, and should not be
construed as debt.
7. Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills with maturities of up to one year. We
note that not all of these instruments are classified as cash or
cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of three months do not meet the definition of
short-term or highly liquid and are held for purposes other than
meeting short-term commitments. In accordance with IFRS, these
instruments are not categorised as cash or cash equivalents and are
disclosed as money market instruments with maturities greater than
three months.
The table below summarises the instruments managed by the Group
as cash, and their IFRS classification:
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
Assets managed as cash GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- --------- ---------
Bank deposits with maturities > 3 months 5,875 11,246 12,932
Treasury bills with maturities > 3 months - 1,245 -
---------------------------------------------------- --------- --------- ---------
Money market instruments with maturities > 3 months 5,875 12,491 12,932
---------------------------------------------------- --------- --------- ---------
Cash 4,576 6,334 2,372
Bank deposits with maturities <= 3 months 6,832 514 4,475
---------------------------------------------------- --------- --------- ---------
Cash and cash equivalents 11,408 6,848 6,847
---------------------------------------------------- --------- --------- ---------
Total assets managed as cash 17,283 19,339 19,779
---------------------------------------------------- --------- --------- ---------
8. Fair value measurement for derivative financial
instruments
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy based on the
significance of inputs used in measuring their fair value. The
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly
(i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
Total Level 1 Level 2 Level 3
As at 30 September 2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 2,234 2,234 - -
Other securities 944 888 - 56
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (270) - (270) -
----------------------------------------------------------- ------- ------- ------- -------
Total 2,908 3,122 (270) 56
----------------------------------------------------------- ------- ------- ------- -------
Total Level 1 Level 2 Level 3
As at 30 September 2020 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 2,365 2,365 - -
Other securities 394 394 - -
Forward foreign exchange contracts used for seed funds 41 - 41 -
Foreign exchange options used for seed funds 5 - 5 -
Forward foreign exchange contracts used for hedging 112 - 112 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (35) - (35) -
----------------------------------------------------------- ------- ------- ------- -------
Total 2,882 2,759 123 -
----------------------------------------------------------- ------- ------- ------- -------
Total Level 1 Level 2 Level 3
As at 31 March 2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 2,199 2,199 - -
Forward foreign exchange contracts used by seed funds 215 - 215 -
Foreign exchange options used by seed funds 45 - 45 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging - - - -
Forward foreign exchange contracts used by seed funds (16) - (16) -
----------------------------------------------------------- ------- ------- ------- -------
Total 2,443 2,199 244 -
----------------------------------------------------------- ------- ------- ------- -------
There have been no transfers between levels in any of the
reported periods.
Basis for classification of financial instruments within the
fair value hierarchy
Forward foreign exchange contracts are classified as Level 2.
The fair value of forward foreign exchange contracts is established
using interpolation of observable market data rather than a quoted
price.
Options are classified as Level 3. The fair value of an option
is established using a Black-Scholes model.
9. Called --up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025 pence. All shares are
equally eligible to receive dividends and the repayment of capital
and represent one vote at the shareholders' meeting.
Unaudited as at Unaudited as at Audited as at
30 Sep 21 30 Sep 20 31 Mar 21
-------------------- -------------------- --------------------
GBP'000 Number GBP'000 Number GBP'000 Number
------------------------------------ ------- ----------- ------- ----------- ------- -----------
Authorised
Ordinary shares of 0.025 pence each 100 400,000,000 100 400,000,000 100 400,000,000
Called up, allotted and fully paid
Ordinary shares of 0.025 pence each 50 199,054,325 50 199,054,325 50 199,054,325
------------------------------------ ------- ----------- ------- ----------- ------- -----------
Movement in Record plc shares held by the Record plc Employee
Benefit Trust ("EBT")
The EBT was formed to hold shares acquired under the Record plc
share-based compensation plans. Under IFRS the EBT is considered to
be under de facto control of the Group, and has therefore been
consolidated into the Group financial statements.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income. Any such gains or losses are recognised directly in
equity.
Number
------------------------------------------------------ ---------
Record plc shares held by EBT as at 31 March 2020 3,219,387
Net change in holding of own shares by EBT in period 3,071,133
------------------------------------------------------ ---------
Record plc shares held by EBT as at 30 September 2020 6,290,520
Net change in holding of own shares by EBT in period 6,137
------------------------------------------------------ ---------
Record plc shares held by EBT as at 31 March 2021 6,296,657
Net change in holding of own shares by EBT in period 3,105,777
------------------------------------------------------ ---------
Record plc shares held by EBT as at 30 September 2021 9,402,434
------------------------------------------------------ ---------
The EBT holds shares in Record plc which are used to meet the
Group's obligations to employees under the Group Profit Share
Scheme and the Record plc Share Scheme. Own shares are recorded at
cost and are deducted from retained earnings.
10. Related parties
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries, the
EBT and the seed funds. There has been no change in related parties
from those disclosed in the Annual Report 2021.
Transactions or balances between Group entities have been
eliminated on consolidation and, in accordance with IAS 24, are not
disclosed in this note.
Key management personnel
The compensation given to key management personnel is as
follows:
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ----------
Short-term employee benefits 3,825 2,809 6,214
Post-employment benefits 156 178 309
Share-based payments 926 389 949
----------------------------- ---------- ---------- ----------
4,907 3,376 7,472
----------------------------- ---------- ---------- ----------
The dividends paid to key management personnel in the six months
ended 30 September 2021 totalled GBP1,434,256 (six months ended 30
September 2020: GBP1,598,335; year ended 31 March 2021:
GBP3,028,563).
11. Non-controlling interest
From time to time, Record plc may make an investment in an
entity where it is in a position to be able to control the entity.
Non--controlling interests occur when Record plc is not the only
investor in the entity. The non-controlling interest is measured at
cost plus the share of profit or loss of the third party investment
in the entity.
Investment in Trade Record Ltd
On 21 December 2020, Record plc disposed of its entire
shareholding in the ordinary share capital of Trade Record Ltd.
In accordance with IFRS 10, the financial results of Trade
Record Ltd were consolidated on a line-by-line basis within the
financial statements of the Group up until disposal.
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------- ---------- ---------
Non-controlling interest in Trade Record Ltd - 125 -
--------------------------------------------- ---------- ---------- ---------
12. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of approval.
Information for shareholders
Record plc
Record plc is a public limited company incorporated in the
UK.
Registered in England and Wales Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are based in Windsor.
Further information on Record plc can be found on the Group's
website: www.recordcm.com
Dates for 2021 interim dividend
Ex--dividend date 2 December 2021
Record date 3 December 2021
Interim dividend payment date 30 December 2021
----------------------------- ----------------
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Further information about the Registrar is available on their
website: www.linkgroup.eu
AUME definition
The basis for measuring AUME differs for each product and is
detailed below:
-- Passive Hedging mandates - the aggregate nominal amount of
passive hedges actually outstanding in respect of each client;
-- Dynamic Hedging mandates - total amount of clients'
investment portfolios denominated in liquid foreign currencies, and
hence capable (under the terms of the relevant mandate) of being
hedged;
-- Currency for Return mandates - the maximum aggregate nominal
amount of outstanding forward contracts for segregated clients, or
the Net Asset Value where Record acts as Investment Manager to a
Fund;
-- Multi-product mandates - the chargeable mandate size for each client; and
-- Cash - the total set aside by clients and managed by Record.
Notes to Editors
This announcement includes information with respect to Record's
financial condition, its results of operations and business,
strategy, plans and objectives. All statements in this document,
other than statements of historical fact, including words such as
"anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", "may", "will", "continue", "project" and similar
expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the
Company's future performance and are subject to risks,
uncertainties and assumptions that could cause the actual future
results, performance or achievements of the Company to differ
materially from those expressed in or implied by such
forward-looking statements.
The forward-looking statements contained in this document are
based on numerous assumptions regarding Record's present and future
business and strategy and speak only as at the date of this
announcement.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statements contained in this announcement whether as a result of
new information, future events or otherwise.
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
[1] As a currency and derivatives manager, Record manages only
the impact of foreign exchange and not the underlying assets,
therefore its "assets under management" are notional rather than
real. To distinguish this from the AUM of conventional asset
managers, Record uses the concept of assets under management
equivalents "AUME" and by convention this is quoted in US dollars.
A full definition of AUME is provided at the end of this
document.
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Policy.
END
IR BIBDBUBDDGBD
(END) Dow Jones Newswires
November 23, 2021 02:00 ET (07:00 GMT)
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